Does Airbnb break your mortgage rules?

If you don’t mind the thought of strangers hanging around in your living room in their PJs and judging your extensive collection of knickknacks and house plants, then renting out your home as a holiday let is tempting. Using Airbnb to rent your home as a holiday let is becoming a popular way to make extra money, but you could end up in trouble. We don’t mean facing the wrath of grumpy guests when their breakfast eggs are too runny, but the rather more delicate issue of problems with your mortgage provider.

Whether you choose to clear off entirely and rent your whole house, or stick around to see your visitors and let out a single room, it can be a way to earn extra cash. However, it must be approached with caution as it has ramifications for your investment, particularly if you still have a mortgage on your house. Before you get started on your Airbnb adventure there are several people you must tell; your lender, your home insurer and the taxman.

Airbnb and your mortgage lender

Different lenders have different rules when it comes to Airbnb. Ray Boulger, mortgages expert at broker John Charcol, says that there are unlikely to be specific terms and conditions on your mortgage referencing the Airbnb. Instead, he said: “there will be conditions about letting the property generally. Nearly all residential mortgages include a condition that states the property cannot be let without obtaining the lender’s permission and lettings via Airbnb would come under this exclusion.”

Some lenders will charge more if you are renting the house out, while others will refuse it altogether, particularly if you are looking at a short-term holiday let, as with Airbnb lettings. You may find it easier to obtain permission for renting out just one room. David Hollingworth, mortgage broker at London and Country said: “If you are simply looking to let a spare room on a casual basis then it’s likely to be viewed more along the lines of a lodger and lenders are likely to be accepting, as the owner is still in the property during the stay.”

Airbnb and your home insurer

Your home insurer should also be consulted before you put a property on Airbnb. It may charge you a one-off fee or increase your premium. If it refuses to cover short-term lettings, and some will, there are specialist providers available through BIBA Link opens in a new window (the British Insurance Brokers Association) which provide cover for holiday lets. Airbnb claims that its Hosts Guarantee Link opens in a new window will reimburse some guest damages, but this does not include liability insurance which is a type of insurance policy taken out by you as the home owner that covers personal injury, negligence or property damage claims made against you by members of the public, when letting out your home. This guarantee is not an insurance policy, and Airbnb says that you should have insurance in place as well.

Airbnb and the taxman

Even if you are renting a room or your home out on an irregular basis, you must still declare your earnings to HMRC. If Airbnb lets are your only source of income and you make less than £11,500 per year, you may not have to pay any tax on the rent. If you are renting just a room in your home you may be covered by Rent a Room tax relief Link opens in a new window, which means that the first £7,500 you earn from renting a room is tax free. This doesn’t apply if you rent out the whole property though and you must pay tax on anything above £7,500. If you are unsure on your own position, check with the tax authorities. There is more information about paying tax on rental properties on gov.uk Link opens in a new window.

Can I fly under the radar?

Given the rules and red tape surrounding Airbnb lettings, it may be tempting to think that you should just go ahead without telling lenders, insurers and officials…Don’t.

Mark Harris, chief executive of mortgage broker SPF Private Clients, warns that you will be in breach of your mortgage contract if you do this, which automatically invalidates your home insurance if things go wrong. Not telling your insurer compounds this and the potential losses could be huge if your guests damage your property.

As for the tax authorities, they have recently invested in a powerful Connect computer that creates a full profile of taxpayers through external sources, including Airbnb and eBay listings, so chances are you’ll be spotted.

As long as you are prepared for the eccentricities of your guests, Airbnb can be a great way to increase income and invite new experiences into your home. Just be sure you have put everything in place before you get started.

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.